Ecuador Court Fines Chevron $8.6 Billion

by Roger Alford

Today an Ecuador court fined Chevron $8.6 billion for environmental damage. According to the Wall Street Journal, $5.4 billion of that is to restore polluted soil, $1.4 billion to create a health system for the community, $800 million to treat individuals injured by the pollution, $600 million to restore polluted waters, $200 million to restore native species, $150 million to transport water, and $100 million to create a community cultural reconstruction program. The judgment in Spanish is available here. (English translation forthcoming)

The Ecuadorian court’s judgment is illegitimate and unenforceable. It is the product of fraud and is contrary to the legitimate scientific evidence. Chevron will appeal this decision in Ecuador and intends to see that justice prevails. United States and international tribunals already have taken steps to bar enforcement of the Ecuadorian ruling. Chevron does not believe that today’s judgment is enforceable in any court that observes the rule of law. Chevron intends to see that the perpetrators of this fraud are held accountable for their misconduct.

Today’s case is historic and unprecedented. It is the first time Indigenous people have sued a multinational corporation in the country where the crime was committed and won. Today’s historic ruling against Chevron is a testament to the strength of the Ecuadorian people who have spent 18 years bringing Chevron to justice while suffering the effects of the company’s extensive oil contamination.

To give one perspective, Ecuador’s GDP is $42 billion, so the award exceeds 20% of Ecuador’s total annual GDP. The total amount awarded by the United Nations Compensation Commission against Iraq for the environmental damage to Kuwait and other neighboring countries resulting from the 1991 Persian Gulf war was $5.3 billion. Exxon paid just over $4.3 billion for the damage caused by Exxon Valdez.

The next step for Chevron is to appeal the judgment in Ecuador and then challenge enforcement abroad. The plaintiffs have been ordered by a U.S. federal court to cease further litigation of the case and have been enjoined from benefiting from recognition or enforcement of any judgment. Ecuador has been ordered by an BIT tribunal to “take all measures at its disposal to suspend or cause to be suspended the enforcement or recognition within or without Ecuador of any judgment against [Chevron].” Given the orders of the United States federal court and the arbitral tribunal, the plaintiffs will have an extraordinarily difficult time executing judgment. If they do, I would strongly suspect that the federal court would hold the plaintiffs in contempt of court and the arbitral tribunal would hold Ecuador liable for any damage Chevron suffers in paying on the judgment.

“[T]he plaintiffs will have an extraordinarily difficult time executing judgment.”

Chevron has billions of dollars in assets in places (eg, Venezuela) that might enforce the judgment out of ideological solidarity or simple larceny. The plaintiffs would be entitled to the proceeds of enforcement (likely by sale to the government), net of enforcement costs, capital repatriation taxes, remittance fees, etc.

2.15.2011
at 10:22 am EST International Lawyer

A fascinating case all around. Does/should it matter at all that the Ecuador trial took place essentially at Chevron’s request, triggered by its request for dismissal of the original NY lawsuit on forum non conveniens grounds? If the Ecuadorian result was truly fraudulent, then presumbly it shouldn’t be enforceable abroad, but at the same time it seems a bit disingenuous for Chevron to have requested an Ecuadorian trial and then to claim that the result of that trial is illegitimate. I’d be curious to hear others’ thoughts.

2.15.2011
at 12:09 pm EST Chimene Keitner

Cassandra Burke Robertson and I are currently finishing an article on precisely the issue raised by Chimène Keitner. Very briefly: In cases like Chevron/Ecuador (plaintiff sues in a U.S. court, defendant successfully moves to dismiss in favor of a foreign court on forum non conveniens grounds, foreign court issues a judgment against defendant, plaintiff then seeks enforcement back in the U.S.), plaintiffs have tried to convince U.S. judges to estop defendants from claiming that defects in the foreign legal system preclude enforcement. But these estoppel arguments generally fail because, under existing doctrine, the foreign judicial adequacy standard applied at the enforcement stage is different from and stricter than the foreign judicial adequacy standard applied at the FNC stage (not to mention the possibility of post-dismissal changes in the adequacy of the foreign judiciary). In effect, this often allows defendants to argue (consistently) that the same foreign court is adequate for FNC dismissal purposes but not enforcement purposes. We think that this state of affairs can be problematic from an access-to-justice perspective, and we propose some possible solutions. We hope to have a draft ready to share soon.

March 24, 2015Responding to Rogier Bartels About Perfidy at Just Security
My friend Rogier Bartels published two excellent posts at Just Security over the past few days (here and here) in which he argues that it is inherently perfidious to launch an attack from a military object disguised as a civilian object. Just Secur...